It is received wisdom that intercepts by US Intelligence captured a vow by Al Qaeda to “change the face of history.” This resulted in US action to close embassies around the world as precaution. The presumption was another Embassy Attack was coming, possibly many embassies at once on Barack Obama’s birthday. Well, what if US Intelligence got it wrong. A shocking possibility, I know.

Imagine this scenario to see how incredibly wrong they might have been:

The act to change the face of history was a far bolder gambit than some run-of-the-mill embassy attacks. That’s so Benghazi 2012 for Pete’s sake. Instead, Al Qaeda’s bold act would be to employ chemical weapons in Syria. That is, Al Qaeda would take chemical weapons smuggled out of Libya and use them against Syrian civilians in a “false flag” operation.

The attack would transpire in such a very clever manner so the blame would be (naturally) pinned on Bashar Assad. Western indignation would mount against Assad as a pariah and a war criminal who would gas his own people. John Kerry would take the bait all hook, line and sinker. Hell, Kerry sees this as HIS moment to change the face of history, does he not?

Ask yourself this question: why would Assad gas civilians instead of gassing the rebels’ military forces or strong points? Why? Well, because he didn’t do it. Al Qaeda did it.

This frame job on Assad would force the hand of a reluctant Obama. Obama would have to enforce his “let me be clear” Red Line policy. As Al Qaeda chuckles and stands aside to watch the show, a cruise missile and air assault of key Assad assets and command centers would ensue.

Cue the escalation scenario:

Jihadis retaliate against US and western European countries and interests across the region and even across the world. Self-directed Sleeper Cells see this as the clear call to take action now. Hezbollah unleashes missiles and terrorist attacks across the border into Israel. Iran jumps into the fray even going so far as to attack Israel directly. Israel would retaliate in self-defense. A series of response and counter response actions would escalate the violence and expand the fight to greater and greater levels.

It wasn’t Bashar al-Assad who called Obama’s Red Line Bluff about WMDs. Nope, it was Ayman al Zawahiri. And somewhere right now he is smirking because he knows that with one simple chemical attack that he has changed the face of history forever.

If it’s not true at least it can make for a good screen play for Ben Affleck’s next movie…

USA Today had a howler today where Obama’s efforts with Health Care Reform were likened to the effort of Santiago to bring home his prized marlina in “The Old Man and The Sea.” The article quoted from the new David Corn book. A book with a catchy catchy title: “Showdown: The Inside Story of How Obama Fought Back Against Boehner, Cantor, and the Tea Party.

The frustrations of the presidency once had Barack Obama reach for a literary metaphor.

“At times he couldn’t help feeling, as he told one associate, a kinship with the protagonist in Ernest Hemingway’s The Old Man and the Sea,” writes David Corn in his new book on the presidency.

“He had, against tremendous odds, caught a big fish, but on the long voyage back to shore, his prized catch had been picked to pieces by sharks,” Corn writes.

Somewhere in Hell, Al Davis awaits the arrival of the Doppelganger Dictator, Kim Jung Il. With both Al Davis and the Korean Despot dying in the same year it will bleak for future sales of ill-fitting satin workout suits and dark sunglasses.

Short answer is “How Can It Not?” When the effective rate of taxation is raised on an investment, then less capital will flow to that investment. All else equal.

The dirty economic secret no one wants to talk about in DC is that the Buffet Rule would NOT be a tax on labor but instead a new tax on capital.

Follow me here:

Wealthy people use tax-free bonds as a significant percentage of their asset allocation and hence much of the income of the ‘wealthy’ is derived from dividend income and capital gains — and NOT from labor.

Tax free bonds fund our beloved infrastructure projects on state and local levels and much of the capital invested in these bonds flows from people and institutions (groups of people) who want low-risk and tax-free income.

To be effective, the so-called Buffet Rule would have to raise new tax revenue by taking a new bite from income derived from investments in (formerly) tax-free bonds.

We should really call the Buffet Rule a new Alternative Minimum Tax on Capital.

Why? Because if it quacks like a duck…

Were the Buffet Rule to pass, then rational investors would adjust to the new tax regime. This will reduce incentives to buy these low-return bonds on the margin. Which in turn would result in an increase in cost of capital to fund these infrastructure projects — projects that build our schools, roads, airports, etc. The outcome would be less infrastructure work per dollar of capital. Less efficient capital means less capital production on the margin.

So the Buffet Rule could actually mean less bridges, roads and schools as we ride the Slippery Slope of Progressive Inanity to Achieve Economic Growth.

Q: Why would tax-free bonds be disadvantaged against other opportunities?

A: Because the Buffet Bite would be bigger on a relative basis.

If you have to pay the New Capital AMT you may as well invest in riskier investments with the opportunity for a greater rate of return. The bigger the size of the Buffet Bite to ‘equalize’ tax rates to the Middle Class Tax Rate, then the more that (formerly) tax-free munis and their brethren are impacted. This makes it tougher to attract investment dollars as they compete in the capital markets.

The famous Chicago School of Economics theory of “Rational Expectations” makes the conclusion obvious. Obvious to all, of course, except to those of the Krugman Kamp of Economics.